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Schnitzer Steel Industries SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Schnitzer Steel Industries managers to do a situational analysis of the company . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Schnitzer Steel Industries is facing in its current business environment.
The Schnitzer Steel Industries is one of the leading companies in its industry. Schnitzer Steel Industries maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Schnitzer Steel Industries to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Schnitzer Steel Industries strengths, and eradicate its weaknesses.
Step by Step Guide to Schnitzer Steel Industries SWOT Analysis
Strengths of Schnitzer Steel Industries – Internal Strategic Factors
As one of the leading firms in its industry, Schnitzer Steel Industries has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Schnitzer Steel Industries are –
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Highly skilled workforce through successful training and learning programs. Schnitzer Steel Industries is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Highly successful at Go To Market strategies for its products.
- Good Returns on Capital Expenditure – Schnitzer Steel Industries is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Automation of activities brought consistency of quality to Schnitzer Steel Industries products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong Free Cash Flow – Schnitzer Steel Industries has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong Brand Portfolio – Over the years Schnitzer Steel Industries has invested in building a strong brand portfolio. The SWOT analysis of Schnitzer Steel Industries just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Weakness of Schnitzer Steel Industries – Internal Strategic Factors
Weakness are the areas where Schnitzer Steel Industries can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Schnitzer Steel Industries has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Schnitzer Steel Industries is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Limited success outside core business – Even though Schnitzer Steel Industries is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Schnitzer Steel Industries is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Schnitzer Steel Industries is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- The profitability ratio and Net Contribution % of Schnitzer Steel Industries are below the industry average.
Opportunities for Schnitzer Steel Industries – External Strategic Factors
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Schnitzer Steel Industries in other product categories.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Schnitzer Steel Industries to capture new customers and increase its market share.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Schnitzer Steel Industries. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Schnitzer Steel Industries’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- The market development will lead to dilution of competitor’s advantage and enable Schnitzer Steel Industries to increase its competitiveness compare to the other competitors.
- New trends in the consumer behavior can open up new market for the Schnitzer Steel Industries . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Schnitzer Steel Industries to drive home its advantage in new technology and gain market share in the new product category.
Threats Schnitzer Steel Industries Facing - External Strategic Factors
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Schnitzer Steel Industries in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Schnitzer Steel Industries’s product especially in the emerging markets and low income markets.
- Liability laws in different countries are different and Schnitzer Steel Industries may be exposed to various liability claims given change in policies in those markets.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Schnitzer Steel Industries
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Schnitzer Steel Industries
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Schnitzer Steel Industries
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Schnitzer Steel Industries managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Schnitzer Steel Industries
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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